Caesars Judge Says He May Not Be Able to Halt Creditor Suits

  • Casino giant asking for freeze on cases in Delaware, New York
  • Company threatens to walk away from $4 billion bankruptcy deal

The judge overseeing the bankruptcy of Caesars Entertainment Corp.’s main operating unit said he’s not sure he has the power to halt bondholder lawsuits in other courts that could also tip the parent company into Chapter 11.

Caesars Entertainment Operating Co., or CEOC, filed for bankruptcy in January 2015. It’s asking for a court order to block parties from taking action in the suits, which target the parent company for actions preceding the unit’s Chapter 11 filing.

U.S. Bankruptcy Judge A. Benjamin Goldgar said at a hearing in Chicago Wednesday that it may not make any difference if he tells the parties to put the brakes on the litigation, since much of the briefing has been completed. The judges in New York and Delaware appear to have enough information to rule without jury trials, he said.

“If it is just a matter of enjoining the parties, I don’t see the emergency,” Goldgar said. It may be too late to stop either court from ruling, he said. Also, Goldgar questioned whether he has the authority in this situation to tell another judge not to rule, even though he’s allowed to order the parties to stand down.

Drop Deal

Caesars has threatened to pull out of a $4 billion deal to reorganize the bankrupt CEOC if Goldgar refuses to halt the lawsuits by next week.

In a regulatory filing Wednesday, Caesars said its agreement to fund CEOC’s reorganization with cash, new debt and shares in the reorganized entities would automatically lapse on June 22 unless Goldgar issues an injunction by June 15.

After the judge’s remarks Wednesday, CEOC’s second-lien 10 percent bonds due in 2018 climbed to a high of 39.6 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. They last traded Monday.

Caesars has been fighting a group of second-tier bondholders since before CEOC sought court protection from creditors. The disputes revolve around whether Caesars wrongly moved assets away from CEOC and abandoned a bond-repayment guarantee before the bankruptcy.

Adviser Testimony

After Goldgar raised questions about whether he could rule, the judge heard testimony from Jim Millstein of Millstein & Co., a financial adviser to CEOC.

Under questioning by Bruce Bennett, lead lawyer for the second-tier bondholders, Millstein said he hasn’t investigated whether Caesars owners Apollo Global Management and TPG Capital and some of their top managers have enough money to help pay creditors.

A court-appointed bankruptcy examiner has said creditors may be able to successfully sue several entities and individuals for their roles in restructuring CEOC, and Bennett was trying to show that even if the parent was forced to file its own bankruptcy, there would be other groups that creditors could tap for payment.

Millstein said he didn’t look into who, besides the parent company, might be able to help fund the operating unit’s reorganization. He’s due to return to court Thursday to continue testifying about why the lawsuits could hurt the Caesars reorganization efforts.

Goldgar invited both sides to send him written arguments about whether he has the power to order the other judges not to rule. He didn’t say if he would decide Thursday on whether to stop bondholders from pressing their suits. The company is asking for a decision before a hearing next week in Delaware.

The bankruptcy is In re Caesars Entertainment Operating Co. Inc., 15-01145, U.S. Bankruptcy Court, Northern District of Illinois (Chicago). The main Caesars lawsuit is BOKF NA v. Caesars Entertainment Corp., 15-cv-01561, U.S. District Court, Southern District of New York (Manhattan).

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